With inflation at a four-decade high, Americans are seeing price increases everywhere, especially when it comes to food and groceries.
Costco’s hot dog and drink combo, which retails for $1.50, hasn’t gone up in price since the 1980s. And as the cost of other food court items sold by the retailer increase, like the chicken bake that jumped from $2.99 to $3.99, or their 20-ounce soda that jumped from 59 cents to 69 cents, all eyes are on what will happen to the company’s iconic hot dog.
But Costco CEO Craig Jelinek made it clear that the famous $1.50 hot dog and soda combo would remain unaffected by inflation.
When asked in an interview with CNBC this week if he would raise the price of the food court’s fan-favorite item, he answered with one-word.
“No,” Jelinek told CNBC.
But there was a time where Jelinek himself was unsure if the price of the hot dog combo would go up, as the company loses money on the deal. He mentioned his concern to founder and former CEO Jim Sinegal, and as he told 425 Business, Sinegal made it clear that if Jelinek were to raise the price of the hot dog, he’d “kill” him.
Your membership is safe as well
The price of the hog dog combo is staying the same, and so is your Costco membership.
Last month, Costco discussed a potential increase in membership fees. In the past, the fees have risen every five to six years, and the last increase was in June 2017.
Gold star and business memberships are currently $60 a year, and the executive membership is at $120, with Costco seeing a worldwide 90% renewal rate — a record for the warehouse retailer, according to MSN MarketWatch.
But even with its membership fees contributing largely to its overall global sales, Jelinek confirmed that at this point, a membership fee hike is not on the table.
“I made it very clear,” he told CNBC. “I don’t think it’s the right time. Our sign-ups continue to be strong.”
Robert Nelson, Costco’s senior vice president of treasury, has also previously emphasized that membership costs will stay the same.
“Given the current macro environment, the historically high inflation, and the burden it’s having on our members and all consumers in general, we think increasing our membership fee today ahead of our typical timing is not the right time,” Nelson said on an earnings call in June.
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I'm an enthusiast with a deep understanding of economic trends and consumer behavior, particularly in the retail sector. My knowledge extends to the impact of inflation on various industries, including how businesses navigate pricing strategies to cope with economic challenges. Now, let's delve into the concepts mentioned in the article.
The article discusses the impact of inflation on prices, with a focus on Costco's food court items. Despite inflation causing price increases in various sectors, Costco's CEO, Craig Jelinek, has assured that the iconic $1.50 hot dog and soda combo will remain unaffected. This is noteworthy because it reflects Costco's commitment to maintaining the affordability of a long-standing customer favorite.
In the past, Jelinek expressed concerns about the financial viability of the $1.50 combo, indicating that the company incurs losses on the deal. However, the founder and former CEO, Jim Sinegal, made it clear that raising the price of the hot dog combo was not an option. This dynamic sheds light on the internal decision-making process within Costco and the importance placed on maintaining certain price points for customer loyalty.
Furthermore, the article touches upon Costco's membership fees, highlighting the company's historical pattern of fee increases every five to six years. Despite the current economic challenges, including high inflation, Jelinek and Robert Nelson, Costco's senior vice president of treasury, emphasize that a membership fee hike is not currently under consideration. This decision is influenced by the macroeconomic environment and the desire to ease the burden on members during a period of historically high inflation.
It's interesting to note that Costco's membership fees significantly contribute to its global sales, and the company boasts a remarkable 90% renewal rate. Jelinek's commitment to maintaining current membership costs reflects strategic decision-making to sustain strong sign-up rates and overall customer satisfaction.
In summary, the article provides insights into Costco's pricing strategy amidst inflation, emphasizing the company's dedication to preserving the affordability of its iconic food items and maintaining stable membership fees despite economic challenges.
